Dividend And Stock Buyback Growth Potentially Accelerate In 2018

Near the end of last month S&P Dow Jones Indices reported preliminary dividend and buyback activity for the S&P 500 Index for the fourth quarter of last year. For the quarter the dollar amount of dividends paid increased 5.4% versus the same quarter in the prior year. Additionally, for the quarter, dividends combined with buybacks increased 3.1% year over year. It is not uncommon for the combined dividends with buybacks to exceed as reported earnings in the quarter and that was the case for Q4 2017 as seen in the below chart.

the dividend payout ratio based on as reported earnings is 47.6%. This remains down from the 60.7% payout ratio in the fourth quarter of 2015 which captured the negative impact of the energy weakness and the headwind from the strong U.S. Dollar.

for the calendar year of 2017, dividends plus buybacks equal $939.17 billion versus $933.60 billion for 2016. Howard Silverblatt, Senior Index Analyst for S&P Dow Jones Indices, commented in the press release that the buybacks and dividend combination could exceed the $1 trillion level this year. Driving the potential increase in buybacks and dividends this year is the reduced corporate tax rate along with the repatriation of cash trapped overseas.